Your potential is unlimited.
I realize that’s the type of cliche that you normally find embossed in cursive script on the side of coffee mugs. It’s trite and impersonal and overused.
But it’s also true.
Your potential to earn and grow is limitless. But it’s not free. You need to invest time and money into developing your potential.
Your time and money are limited, though, and you could also choose to invest in market-based assets, like stocks, bonds or real estate.
How do you make that decision?
Are you going to invest in yourself? Or the market? Or both — and in what proportion?
How do you make these choices?
When you’re buying a few shares of a total stock market index fund, you have a generally clear idea of what you’re getting. You’ve seen the historic returns. You can predict, to a reasonable degree, the consequences of that investment over a multi-decade span.
But when you’re investing in yourself — e.g. learning a new skill, developing a side business, or taking a class — you can’t rely on the same formulas or models. There’s no chart mapping the historic returns.
Financial capital is easy to track. Human capital is harder to quantify — but potentially more rewarding.
Can you compare investing in assets vs. investing in yourself?
How can you make a smarter decision about your own path?
On today’s podcast, I talk to Michael Kitces — a financial planner, entrepreneur, and all-around smart guy — about this million-dollar decision.
Resources Mentioned:
Websites:
Books:
- Essentialism, by Greg McKewon
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Steve Stewart
I think Michael’s “Spend $100 to save 1-minute a day” idea just cleared my way to a new iMac! Thanks Michael!
JK
I love your podcast, Paula! I’ve listened to almost every episode and love how your interviews are structured and find the information you coax out of your guests insightful (and sometimes overwhelming, ha!). This interview with Michael was perfect timing for me as I often struggle with valuing my time and determining where to focus my efforts (although I gather not as extensively as you).
The two most poignant points for me were your final two takeaways. First, I’ve never considered the recurrence of an expense when evaluating it in exchange for my time – that is something I’m going to start doing. Fantastic idea!
I found his final point and your third takeaway most powerful: it’s not the degree that earns you a higher income, but the skills and confidence you gain while pursuing the degree. I’m a big fan of starting at the bottom (or from scratch) and learning your way to the next level. I think so many people overlook the value of obtaining or developing these skills when they enter the work force, explore entrepreneurship, or try to climb the career ladder. Once you learn a skill you can always decide to outsource it, but I think you’ll be much more successful (in work and life) if you learn it first (even if just conceptually). These skills also help you from getting ripped off (i.e. letting someone manage your money when you don’t have a handle on the basics just to get robbed blind or having an employee tell you they can’t do something due to some technical reason, which is untrue but you have no idea because you don’t understand the capabilities or possibilities).
Thanks again for your amazing podcast. Looking forward to many more episodes!
Jordan
Hi from sunny Barbados! Just like to say I love your podcast. You are doing a great job. I have listened to about 90 percent of your episodes. For me this episode is the best! It primarily focused on self care and that is so important for a better life. Michael was informative but did not sound like a know it all. Keep up the good work.
Jared
In comparing different ways to invest one’s resources, I find the expected value formula (value of the outcome X probability of the outcome) to be useful. This episode is one of my new favorites. I am a salaried worker and intend on remaining so for at least the next decade. As such, I’d be interested in hearing a continuation of the discussion on the valuation of one’s time and money in determining the opportunity cost of purchases that save time or improve the quality of life.
Shane
Love this podcast! (this maybe my 5th or 6th time listening to it!)